World Recession

Singapore's investment agency GIC has warned that the world is about to sink into the worst recession in 30 years.

As the global supply of money shrinks, Tony Tan, GIC's deputy chairman, said the world faced a period of "extreme uncertainty".

GIC was formed to manage Singapore's vast foreign currency reserves.

It has invested billions of dollars recently buying into troubled western banks, including UBS and Citigroup.

Swiss banking giant UBS and Wall Street heavyweight Citigroup have suffered substantially from failed investments linked to the US housing market which has slumped since last August.

Citigroup posted a second massive loss for its latest three month period last week after writing down by $12bn (Â£6bn) the value of investments linked to US mortgages and other risky assets.

As a result of the problems, Citigroup said it would cut 9,000 jobs.

The problems afflicting the banks and many of their rivals has resulted in heightened volatility in financial markets, and a freezing up in the supply of money as banks become more risk
averse.

"We could be facing a recession which is longer, deeper and wider than any recession we have encountered in the last 30 years," said GIC's Mr Tan.

Mr Tan defended his purchase of UBS and Citigroup shares: "We regard our investments in UBS and Citigroup as long term investments which will give us good returns when markets stabilise and
economic conditions return to more normal levels."

GIC said it managed assets with a value of "well above $100bn".

Analysts said the fund's assets could be more than $300bn, making it one of the world's biggest sovereign wealth funds.